Golden Destiny Investments Pty Ltd v McCrohon Bergseng Partners t/as MBP Legal

1. [1]

   The Plaintiffs apply pursuant to s 350(5) of the Legal Profession Act 2004 (NSW) to extend the time to have their costs assessed.

Background

1. [2]

   In or about July 2014 the Defendants (whom I shall refer to as MBP) were retained by the Plaintiffs to assist in resolving issues that had arisen with a proposed development at Turramurra. Broadly speaking, the first Plaintiff (GDI) had a contract to purchase a number of properties on the Pacific Highway at Turramurra from individual vendors. Issues arose in relation to GDI’s decision not to novate the contract to a company called New Galaxy Investments Pty Ltd and a subsequent decision by GDI to novate it to a special purpose company to be controlled by a Mr Victor Fong.

2. [3]

   In August 2014 the vendors commenced proceedings in this Court naming GDI as the first defendant. The proceedings were heard by Sackar J commencing on 9 March 2015 and taking place on a large number of days through to June 2015. His Honour gave judgment on 21 August 2015: David Alan Thomson v Golden Destiny Investments Pty Limited [2015] NSWSC 1176. Thereafter, argument about costs took place from October to December 2015 and his Honour delivered judgment in relation to costs on 17 December 2015: David Alan Thomson & Ors v Golden Destiny Investments Pty Limited & Ors (No 2) [2015] NSWSC 1929. The proceedings were complex, as is apparent from Sackar J’s judgments. They involved a number of parties including three defendants, and there were a number of cross-claims.

3. [4]

   On 3 July 2014 MBP gave a costs disclosure. At that time the clients were said to be Louise Lin (aka Yun Lin) and GDI. No complaint was made about this costs disclosure or any subsequent costs disclosure. It is not necessary to set out any part of the costs disclosure except to note that clause 6 of the Terms and Conditions of the costs disclosure relevantly said:

4. [5]

   On 14 July 2014 the costs disclosure was revised and updated to add the other parties who were also to be responsible for MBP’s fees. The amended and updated costs disclosure was made to the present six Plaintiffs. The revised costs disclosure also contained clause 6 (above).

5. [6]

   During the course of MBP’s retainer MBP provided to the Plaintiffs four costs reviews on 14 July, 4 August, 4 September and 24 October 2014. By the time of the final costs review the litigation involved 13 parties.

6. [7]

   Tax invoices were sent from time to time during the period of the retainer. The first was dated 30 July 2014 and the final one dated 19 January 2015. Attached to every invoice was the statement required to be attached under the Legal Profession Act. That statement relevantly said:

7. [8]

   In about mid-January 2015 Mr Peter McCrohon of MBP had a number of conversations with Ms Lin who was the person providing instructions to him on behalf of GDI. Relevantly, she said that she wished to have a Chinese lawyer review and conduct the matter on behalf of GDI. She thought that settlement was more likely to be achieved if that was so. Mr McCrohon was subsequently advised that the matter was to be transferred to Ren Zhou Lawyers who are acting for the Plaintiffs in the present proceedings.

8. [9]

   On 9 February 2016 Ren Zhou Lawyers wrote to MBP saying (inter alia):

9. [10]

   On 7 June 2016 Ren Zhou Lawyers sent another letter to MBP in these terms:

10. [11]

    No costs assessment process was commenced. Instead, these proceedings commenced by the filing of a summons on 2 August 2016 seeking an extension of time under s 350(5) of the 2004 Act to have the bills of costs assessed.

Legislation

1. [12]

   Section 350 of the Act relevantly provides:

2. [13]

   Section 334 of the Act provides that the costs the subject of an interim bill may be assessed (inter alia) at the time of the final bill. Accordingly, the time for assessment commenced to run no later than 19 January 2015.

Reasons for delay

1. [14]

   In her affidavit on behalf of the Plaintiffs Ms Lin relevantly said, concerning her reasons for not having commenced the assessment within the 12 month period specified that the Plaintiffs had not been involved in litigation prior to the Thompson proceedings and it occupied greatly her time and that of her husband, Haizhong Cai. She referred also to associated litigation involving a company called Gold Stone Capital Pty Ltd of which GDI is a 95% shareholder. Gold Stone had lent $3.7 million to MV Developments (Lane Cove) Pty Ltd and $2.7 million to MV Developments (Aust) Pty Ltd. On 26 June 2015 both those borrowers had administrators appointed to them and were subsequently placed in liquidation. She said that as a result of the liquidation Gold Stone had been joined as a defendant in proceedings called the Lum Proceedings. She said that Gold Stone was also a supporting creditor in bankruptcy proceedings against Victor Fong who was the sole director of those two companies. Mr Fong was made a bankrupt on 27 June 2016. GDI, although a supporting creditor, did not attend the final hearing.

2. [15]

   Ms Lin also said that on about 19 June 2015 consent orders were made in the Thompson proceedings which required the second defendant in those proceedings, MV Golden Destiny Developments (Turramurra) Pty Ltd (MVGDD), to pay $2 million to GDI on settlement of the Turramurra properties on 3 July 2015. Subsequently MVGDD argued that it had overpaid GDI $1 million and commenced proceedings to recover those funds. Those proceedings were settled on 17 February 2016, the day they were due to be heard. In respect of those proceedings Ms Lin said that in December 2015 she was required to give instructions to her lawyers and prepare evidence.

3. [16]

   She summarised the reasons for the Plaintiffs’ delay in having the Defendant’s bills of costs assessed as follows:

4. [17]

   It was clarified during oral submissions that the reference in (d) above to the affairs of Gold Stone was intended to be a reference to the proceedings in which Gold Stone was involved.

5. [18]

   An affidavit from another Plaintiff, Haizhong Cai, Ms Lin’s husband, said that Mr Cai had reviewed Ms Lin’s affidavit and he agreed with all the matters set out in that affidavit in relation to the reasons why there had been a delay.

Submissions

1. [19]

   The Plaintiffs submitted that although it is not a prerequisite for obtaining an extension of time that an assessment would produce a reduction in the costs, it is a factor which should be taken into account when determining whether it is just and fair to grant an extension of time. Reference was made to Ciaglia v Beilby Poulden Costello Pty Ltd [2010] NSWSC 748 at [26]. The Plaintiffs submitted that there is a real possibility that the Plaintiffs would obtain a not insignificant reduction on any costs assessment. That is because the hours billed totalled 580. On the assumption that Mr McCrohon as partner and Mr Cakic, as associate, each did half the work at the full rates, and using a notional 45 hour working week the result must be that MBP spent more than three months out of the six months period they were retained working on the Plaintiffs’ matter full time.

2. [20]

   The Plaintiffs submitted that any prejudice must be established by the evidence and that it would be necessary for MBP to establish prejudice notwithstanding the overall onus on the Plaintiffs to show that an extension would be just and fair. In written submissions the Plaintiffs submitted that no prejudice has in fact been demonstrated by MBP although in oral submissions counsel for the Plaintiffs conceded that there was inevitable prejudice to a legal practitioner by the application being out of time. I took that to be a reference to presumptive prejudice which I will discuss presently.

3. [21]

   The Plaintiffs pointed to the reasons for the delay in the affidavits. The Plaintiffs also submitted that it is significant that all of the tax invoices were promptly paid by them.

4. [22]

   MBP initially submitted that on a proper construction of s 350(5) the Court had no jurisdiction to entertain the present application because it could only be made after a costs assessment had been commenced. On 10 November 2016, the day following the service of MBP’s written submissions, the Plaintiffs filed an application to have MBP’s bills of costs assessed. On that basis, MBP accepted that the Court has jurisdiction to determine the present application.

5. [23]

   MBP submitted that from the outset of the retainer the Plaintiffs were aware of the time limit in which to apply for an assessment. In addition to the costs disclosure, each of the invoices bore a notification of the time limit. MBP submitted that the Plaintiffs do not suggest that they did not know of the relevant time limits and knowledge can be an important factor in the exercise of the discretion.

6. [24]

   MBP submitted that there was inadequate explanation for the delay. The preoccupation of Ms Lin and Mr Cai with the Thompson litigation and the other litigation does not constitute a reason why it is just and fair to grant the relief. MBP submitted that the relative commercial sophistication of Ms Lin, who was the person responsible for giving the instructions and dealing with MBP was a relevant matter. MBP submitted that they were prejudiced by the lateness of the application. Finally, MBP submitted that there was no evidence of overcharging.

Consideration

1. [25]

   Before turning to consider the central question of whether it is just and fair for the assessment to be dealt with after the 12 month period it is necessary to say something about an unnecessary distraction introduced into the evidence by Ms Lin. In paragraph 13 of her affidavit she says that her present lawyers informed her when they assumed control of the proceedings in late January 2015 that:

2. [26]

   Although no objection was taken to that paragraph it is difficult to see what its relevance is unless it is relied upon as a basis for suggesting that the costs charged by MBP were excessive. It was not suggested in the Plaintiff’s submissions that that was so.

3. [27]

   It is significant that MBP wrote two letters to Ren Zhou letters after they had been told that the matter was to be transferred to those lawyers. In the first letter of 19 January 2015 Mr McCrohon relevantly said this:

4. [28]

   On 22 January 2015 MBP wrote to the new solicitors saying at the outset:

5. [29]

   The letter then dealt in some detail with the background to the proceedings and the state they had reached. Relevant parts of the letter said this:

6. [30]

   If, as Ms Lin asserts, Ren Zhou Lawyers told her what she has asserted, what they said was without foundation in the light of what is contained in those letters. MBP went beyond what could have been expected of any firm of solicitors whose instructions were withdrawn in the way described.

7. [31]

   The following matters inform my consideration of the matter.

8. [32]

   First, the Plaintiffs were aware at all times of the requirement to have the costs assessed within a 12 month period. Both the costs disclosure of 3 July 2014 and the updated costs disclosure of 14 July 2014 contained a notation to that effect. So too did each of the invoices sent to the Plaintiffs throughout that year and in January 2015. Neither Ms Lin nor Mr Cai, who were effectively conducting the litigation for themselves and the other Plaintiffs, maintain that they were unaware of the limitation period. Justice Harrison in Harvey v Goodman Law Pty Ltd [2011] NSWSC 340 at [9], [14] and [24] considered that knowledge of an applicant’s rights is a relevant consideration. So too is absence of knowledge: Mackowiak v Hagipantelis; Bickhoff v Hagipantelis [2015] NSWSC 1087 at [140] – [142].

9. [33]

   Secondly, the person principally responsible for giving instructions, Ms Lin, was a licensed conveyancer. She would therefore have been aware that a client challenging costs under the Conveyancers Licensing Act 2003 (NSW) had a limited time to do so under the Conveyancers Licensing Regulation 2015 (NSW) regulation 12(b). Although she was not strictly a sophisticated client within the meaning of s 312(1)(c) of the Legal Profession Act, her knowledge may be taken to be more informed than most other members of the community who were not lawyers or conveyancers.

10. [34]

    Thirdly, the Plaintiffs were, and continue to be, represented by solicitors from the time they left MBP. It is clear that at some point advice was given by the present solicitors in relation to a costs assessment of MBP’s invoices. Both Ms Lin and Mr Cai are silent about whether or not they sought or were given advice about applying for an assessment of costs within the 12 month period. Further, although the Plaintiffs’ present solicitor swore an affidavit, he said nothing about that matter. Justice Harrison in Harvey at [14] considered that that was a relevant matter to take into account. I agree, particularly because in the present case those solicitors ultimately wrote two letters to MBP seeking repayment of part of the fees paid and threatening to make an application for assessment if agreement was not reached.

11. [35]

    Fourthly, the reasons given by Ms Lin, adopted by Mr Cai, do not satisfactorily explain the delay. It may be accepted that the Thompson proceedings and the MVGDD proceedings would have taken some time particularly on Ms Lin’s part and also on Mr Cai’s part. However, minimal information has been provided about the MVGDD proceedings and also the proceedings involving Gold Stone. As far as the Thompson proceedings are concerned it seems apparent from the hearing dates identified in the judgment of Sackar J that the hearing had substantially concluded by 22 May 2015 and thereafter judgment was given on 21 August 2015. Why attention could not have been given to MBP’s legal costs in that three month period was not made clear. Nor does Ms Lin’s affidavit identify when it was the MVGDD proceedings commenced nor what work was involved that precluded her or Mr Cai from giving time to the question of the assessment of MBP’s costs except in December 2015.

12. [36]

    In my opinion, the paucity of the evidence concerning the proceedings which have been identified and how they precluded a consideration of assessing MBP’s costs means that the principal reason put forward to explain the delay should be given little weight.

13. [37]

    Fifthly, when the Plaintiffs gave their attention to the matter of the assessment of MBP’s costs, Ren Zhou wrote a letter on 9 February 2016 giving MBP until 23 February 2016 to respond failing which the assessment process would be commenced. Somewhat discourteously, there was no response from MBP but Ren Zhou then failed to make good their threat to commence the assessment process. Instead, they wrote another letter on 7 June 2016 making a reduced demand and saying that they would institute assessment proceedings within 28 days if no response was received. Again, MBP did not bother replying but no assessment process was commenced within 28 days. Eventually, on 2 August 2016 the present proceedings were commenced. There is no explanation by the Plaintiffs or their lawyers for why nothing was done between 23 February 2016 and 2 August 2016. Even if the date of commencement of the present proceedings is regarded as the relevant one, the application is more than six months out of time.

14. [38]

    Sixthly, in Harvey Harrison J at [16] considered it a relevant matter that there was no evidence put forward by the plaintiff in that case that he would not recover the party/party costs which he had obtained in the principal proceedings. In the present case it may be noted that in his judgment of 17 December 2015 Sackar J ordered that GDI was entitled to its costs of the entire proceedings on an indemnity basis. In his oral submissions counsel for Plaintiffs said that as far as the cross-claims were concerned an indemnity costs order was made against one but not the other of two cross-defendants. Nevertheless, and although an appeal has been lodged in the proceedings, as Harrison J said, there is no evidence that GDI’s financial position is compromised when it obtained the indemnity costs order that it did. I accept, as counsel for the Plaintiff submitted, that indemnity costs may not, in some cases, mean all of the costs a party is obliged to pay its lawyers.

15. [39]

    Seventhly, the Plaintiffs point to what they say is the overcharging demonstrated by the number of hours and months that the two lawyers at MBP must have been working to justify the costs they have charged. They suggest, therefore, that it is likely there will be some reduction on assessment.

16. [40]

    In Wong v Watts McCray Lawyers [2015] NSWSC 849 Fagan J said:

17. [41]

    No allegation is made that the charges made by the solicitors were not in accordance with the costs disclosure. Rather, the challenge made to some but not all of the tax invoices is a complaint of excessive charging for the work done. In some cases it is suggested that there is double charging.

18. [42]

    There is nothing in the invoices that shows manifest and readily provable overcharging. I am prepared to assume, however, that the Plaintiffs may be successful in obtaining some reduction in the amounts they have paid. I do not, however, consider that this is a determining factor.

19. [43]

    Finally, the issue of prejudice to the Defendants must be considered. As Studdert AJ noted in Dye at [13] until amendments to the Act in 2006 s 350(5) required the costs assessor to deal with an application made out of time unless the costs assessor considered that the law practice had established that to do so would in all the circumstances cause unfair prejudice to the law practice. By those amendments the onus has now been shifted to the applicant to demonstrate that it is just and fair to proceed with the assessment having regard to the delay and the reasons for it. Prejudice is, however, still a relevant consideration but the fact that no actual prejudice can be demonstrated does not necessarily result in an application to extend time being successful.

20. [44]

    In Brisbane South Regional Health Authority v Taylor (1996) 186 CLR 541 McHugh J, in dealing with extension of time under limitation statutes, spoke (at 555) of the presumptive prejudice to a defendant where an extension of time is granted. That presumptive prejudice involves some or all of the four broad rationales that McHugh J identified (at 552) where he said:

21. [45]

    In my opinion, these remarks are entirely apposite by analogy to the present situation. I am strengthened in that view by the amendment to sub-section (5) which removed the obligation of a defendant to demonstrate prejudice and, as with most legislative provisions concerning extension of limitation periods, put the onus on the plaintiff to show something in the nature of justice and fairness for an extension to be granted. I note also that counsel for the Plaintiffs conceded that there is some prejudice to MBP in having to deal with an application out of time. The Plaintiffs submitted that such prejudice was outweighed by the fact that if an extension is not granted the Plaintiffs will have no recourse in relation to the fees charged. However, that submission does no more than re-state the issue of justness and fairness in a different way.

22. [46]

    The significant matters which tell against the Plaintiffs are (a) the knowledge of Ms Lin of the 12 month period, (b) the absence of a satisfactory explanation for the 12 month period, (c) the absence of any explanation from February to August 2016, and (d) the fact that the Plaintiffs have been legally represented by their present solicitors from the commencement of the 12 month period to August 2016. I am not satisfied that the fact that there is some chance of a reduction in the fees on an assessment nor the absence of actual prejudice, beyond the prejudice conceded, outweighs those matters.

23. [47]

    In the circumstances, I do not consider having regard to the delay and the reasons for the delay that it is just and fair for the application for assessment to be dealt with after the 12 month period.

Conclusion

1. [48]

   I make the following orders: